Raytheon Company (RTN)

RTN 
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Raytheon Co. (RTN)

Q3 2009 Earnings Call

October 22, 2009 09:00 AM ET

Executives

Marc Kaplan - Vice President, Investor Relations

William H. Swanson - Chairman and Chief Executive Officer

David C. Wajsgras - Senior Vice President and Chief Financial Officer

Analysts

Peter Arment - Broadpoint AmTech

Noah Poponak - Goldman Sachs

Ronald Epstein - Bank of America-Merrill Lynch

Troy Lahr - Stifel Nicolaus

Rob Stallard - Macquarie Group

Cai von Rumohr - SG Cowen Securities Inc.

Heidi Wood - Morgan Stanley

Robert Spingarn - Credit Suisse First Boston LLC

George Shapiro - Access 342

David Strauss - UBS

Myles Walton - Oppenheimer

Howard Rubel - Jefferies & Company, Inc.

Douglas Harned - Sanford C. Bernstein

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Raytheon Third Quarter 2009 Earnings Conference Call. My name is Michael and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today's call, Mr. Marc Kaplan, Vice President of Investor Relations. You may proceed.

Marc Kaplan

Thank you, Michael. Good morning, everyone. And thank you for joining us today on our third quarter conference call. The results that we announced this morning, the audio feed of this call, and the slides that we'll reference are available on our website at raytheon.com.

Following the live call, an archive of both the audio replay and a principle version of the slide will be available in the Investor Relations section of our website.

With me today are Bill Swanson, our Chairman and Chief Executive Officer and Dave Wajsgras, our Chief Financial Officer. We'll start with some brief remarks by Will and Dave and then we'll move on to questions. Please limit your question to one per caller and one follow-up to allow for broader participation.

Before I turn the call over to Bill, I'd liked to caution you regarding our forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives and our expected performance constitute forward-looking statements. These statements are based on a wide range of assumptions that the company believes are reasonable but are subject to a range of uncertainties and risks that are summarized at the end of our earnings release and that we discuss in detail in our SEC filings. Bill?

William H. Swanson

Thank you, Marc. Good morning everyone. We delivered strong results during the quarter. Our sales were up 6%, EPS was up 24% and we continued to have good cash flow and solid bookings.

Our bookings for the quarter totaled 5.1 billion. 25% of that was international. If we look further at the 5.1 billion, about a dozen bookings or so were 50 million or more. The balance of our bookings, roughly 1500, averaged around 2.5 million each. This speaks to both the broad diversity and strength of our portfolio.

There is good demand for our solutions, technology, products, upgrades and support. Our program performance across the board remains strong, and so we feel good about our competitive position.

In the U.S. and internationally, our businesses are aligned with the evolving needs of our customers. We're able to both forward fit and backward fit our technology and our solutions to enhance our customers' capabilities. Our international business continues to be strong and it's an important driver to our growth.

We do business in over 80 countries around the world, in fact we have our highest sales from international this quarter and we expect double digit international growth over '08.

There's strong interest in air and missile defense systems. In missiles, air borne sensors, training solutions and classified programs, at the same time having personally worked international business development for over 40 years or close to 40 years, I know from experience that timing is always a factor. That's the nature of the business but as a result of our performance, our capabilities and our relationship building, we have a full pipeline of opportunities.

Another area of focus is our investment in growth and technology. During the quarter, we announced our agreement to acquire BBN Technologies, a privately held world leader in research and development and a provider of critical solutions for national defense and security missions.

We're excited about the capabilities that BBN will provide us and see immediate areas where there are technologies can be applied to enhance our products. We expect the transaction to close in the fourth quarter.

So overall, we continue to see a high demand for our solutions domestically and internationally, which makes us confident that we'll continue to execute and drive for future growth.

Shifting the guidance in our news release this morning, we announced that we're increasing our 2009 guidance for EPS and ROIC. And while we're still going through our 2010 planning process,

We provided preliminary guidance for 2010 that shows good growth and strong performance. We believe this positive forecast is a clear demonstration of the success of our strategic planning. Our proven technologies and innovative solutions are squarely aligned with U.S. and international customers' priorities on capabilities, performance and cost.

This provides us a solid foundation to continue to grow and to create shareholder value. With that let me turn it over to Dave.

David C. Wajsgras

Okay. Thanks Bill. I have a few opening remarks, starting with the third quarter highlights and then we'll move on to questions.

During my remarks, we'll be referring to the website that we issued earlier this morning. Okay, if everyone could please move to page three. As Bill noted we performed well in the third quarter, sales of 6.2 billion are up 6% from Q3 of last year. Income from continuing operations of 499 million was up 14% and EPS from continuing operations was $1.25 was up 24%.

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